CAD/JPY to 90?

CAD/JPY to 90?

Chart Of The Day

CAD/JPY to 90?

Next week is an exceptionally important one for CAD/JPY with the Bank of Canada’s monetary policy announcement and Janet Yellen’s semiannual testimony on the calendar. Friday’s U.S. and Canadian economic reports harden the case for BoC and Fed hawkishness. 45K jobs were added in the month of June, driving the unemployment rate down to 6.5% from 6.6%. Although most of the jobs were part time, the uptick in the participation rate and the fact that Canada did not lose full time jobs (after adding a whopping 77K in May), reflects labor market strength. The IVEY PMI index also rebounded sharply in June after pulling back in May. As for the dollar and the USD/JPY portion of the trade, traders are clearly banking on Yellen’s continued optimism. While Friday’s labor market was mixed, the overall report was good enough for dollar bulls who have turned a blind eye to any negative reports and trusting in the Fed. The argument is compelling with all 3 members of the Fed leadership (Yellen, Fischer and Dudley) pointing to the improvements in the U.S. economy as reasons for policy normalization. The 222K increase in non-farm payrolls in June and the upward revision to jobs in May is enough for Yellen to maintain her credibility and justify her positive labor market assessment. While the unemployment rate ticked up to 4.4% from 4.3%, it has been low for some time so it is not a major concern particularly since the participation rate and average weekly hours increased. The slowdown in wage growth on the other hand is a bigger problem especially as earnings in May were revised lower but investors dismissed that as they hope wages will rebound in the months ahead on stronger service and manufacturing activity and uptick in jobs.

Technically, CADJPY shot sharply higher on Friday and oftentimes after these strong moves, there’s continuation. Taking a look at the weekly chart, now that the currency pair has broken above the 38.2% Fib retracement of 2014 to 2016 slide, there’s no resistance until the December 2016 high near 89 and then the 200-day SMA near 90.73.

EUR/GBP to 90 Cents?

EUR/GBP to 90 Cents?

Chart Of The Day

EUR/GBP to 90 Cents?

Of all the major events this past week, the only one with a lasting impact on the market was the UK election. The “smart strategic move” by Theresa May turned into a nightmare for the Conservative Party and the British pound. Sterling dropped more than 2% on Thursday evening to its weakest level in 6 weeks and the worst may be yet to come. May is putting on a brave face by confirming Brexit talks will begin in 10 days but the country is divided and her Brexit strategy is in tatters. Unfortunately the EU is aware of her defeat and are likely to use it to their advantage. This is bad news for the British pound. Sterling consolidated its losses on Friday but this is strictly a relief rally on the hope for some sort of compromise solution. The government is weakened and the economy is in flux. Recent data hasn’t been terrible but with inflation at a 3 year high and wages falling the U.K. is headed for trouble. Foreign investment and net migration will fall in the coming months/years negatively affecting tax revenues and growth. Next week is a busy one for the U.K. with inflation, consumer spending and retail sales scheduled for release along with a Bank of England monetary policy announcement. However politics could overshadow economics as no changes are expected from the central bank and that means sterling should fall further.

We like selling GBP vs. EUR because the Eurozone economy is doing quite well. This past week the ECB upgraded their GDP forecasts, altered their risk assessment and dropped the word “lower rates” from their forward guidance. The latest economic reports were also better than expected with first quarter GDP revised up to 0.6% from 0.5%. Next week’s ZEW survey is likely be strong as well as investors respond positively to the data.

Technically, EUR/GBP is in an uptrend and the next stop above 88 cents is 90 cents. As long as EUR/GBP holds above -.8550, the uptrend is intact. If it breaks below it the trend will have reversed with further losses likely.

Day Trading Signals March 24 BK – Yesterdays BK Chat +90 pips

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BK Day Trading Chat Room Results 3/23/2015 +90
NZDUSD +20
NZD/CAD +25
NZD/JPY +25
EUR/USD +10
AUD/CAD +10
 
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****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

 

  

  

Date Currency
Event
GMT Strategy
Mar 24 -Tu AUD/USD HSBC PMI 1:45 C-Trade
Mar 24 -Tu AUD/USD HSBC PMI 1;45 C-Fighter
Mar 24 -Tu EUR/USD Flash PMI 9;00 C-Trade
Mar 24 -Tu EUR/JPY Flash PMI 9;00 C-Fighter
Mar 24 -Tu GBP/USD UK CPI 9:30 C-Trade
Mar 24 -Tu GBP/USD UK CPI 9:30 C-Fighter

 

  

Last 24 hours Results
Crowd Fighter 
No trade 

 
C-Trade
No Trade

 

  

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (March 24, 2015) – Good Luck Trading!

1. Eurozone Flash PMIs (4:30am NY Time) Bullish EUR— Potential upside surprise given stronger ZEW and industrial production but we only have a level 2 confidence on this because of weaker factory orders

2. UK CPI (5:30am NY Time) Bearish GBP–Potential downside surprise given drop in BRC shop prices.

3. US New Home Sales (10am NY Time) Bullish USD— Potential upside surprise given rise in existing home sales 

NZD/JPY – Headed for 90?

NZD/JPY – Headed for 90?

Chart Of The Day

NZD/JPY – Headed for 90?

This afternoon the Reserve Bank of New Zealand left interest rates unchanged and told us that they see a prolonged period of interest rate stability. While this is far from the hawkish view that is typically needed to lift a currency, in an environment when investors are worried about who will cut rates next, their steady outlook proved to be extremely positive for NZD/JPY. The currency pair’s gains could be extended if tomorrow’s U.S. retail sales report surprises to the upside. We believe that the February spending numbers will most likely reinforce the attractiveness of the greenback as higher non-farm payrolls, the rise in gas prices and increase in spending according to Redbook point to a stronger report. The Federal Reserve is gearing up to raise interest rates and regardless of whether it comes in June or September this prospect should continue to be extremely positive for USD/JPY and in turn NZD/JPY.

Taking a look at daily chart, the next level of resistance is at 89 the 50% Fibonacci retracements of the December to February decline. Then above that will be the big psychological resistance of 90. As long as NZD/JPY holds today’s low of 87.25, the turn is intact otherwise the currency pair could slide down to the 23.6% of 86.45.

NZDJPY31216

NZD/JPY – Gunning for 90?

NZD/JPY – Gunning for 90?

Chart Of The Day

Fundamentals

NZD/JPY rose to a fresh 6-year high on Friday and we think the move could continue in the coming week. While there aren’t any major economic reports scheduled for release from New Zealand, there are many pieces of data that could affect how NZD/JPY trades. There has been widespread speculation that the Chinese government could increase stimulus in response to weaker Chinese data. If China’s PMI reports surprise to the downside, this speculation could gain momentum, providing additional support to the New Zealand dollar. At the same time, we have an exceptionally busy week for the JPY with Japan poised to raise the sales tax for the first time in 17 years. US non-farm payrolls are also scheduled for release and this report along with the leading indicators for payrolls will affect the market’s demand for USD/JPY, having direct impact on NZD/JPY. Since we are looking for payroll growth to accelerate, it is yet another reason why we believe NZD/JPY will test and break 90 in the coming week.

Technicals

We have to turn to the monthly chart of NZD/JPY to find resistance. There is no major resistance until the psychologically significant 90 level and above that the 2007 high of 97.77. The daily charts show the closest level of support at 86.35.